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Hillary Clinton's Biggest Vulnerability: Her Economic Agenda

Getty Images/Chip Somodevilla

Amid all the midterm hoopla over Benghazi, the IRS and Veterans Affairs scandals, and Obamacare, it’s easy to forget that presidential elections are mostly defined by the economy. Even today, Americans’ top priority is the economy and that’s unlikely to change by 2016. For Democrats, that's a problem. They have several smart ideas to help the economy fully recover from the Great Recession, but as we enter the latter half of Barack Obama’s second term, the public increasingly blames him and his party for the weak recovery.

“If Hillary Clinton runs in 2016, you can certainly make a case, even though the third term is hard for an incumbent party … they should be in a good position to win again,” said Ruy Teixeira, a democratic strategist and senior fellow at the Center for American Progress. “The thing that is most likely to cause them problems is that people still feel like the economy has barely budged.”

In 2008, Obama campaigned on an economic platform to boost long-term growth by investing in science, technology, and education. But before he could act on that agenda, he was tasked with fighting the worst recession in 80 years—and as we now know, his actions were insufficient. More than  $700 billion in fiscal stimulus couldn't stop the unemployment rate from rising above 10 percent. This wasn’t entirely his fault; Republicans blocked further rounds of fiscal stimulus that would have helped the economy. But after five-plus years of Obama rule, employment in the economy just surpassed its pre-crisis peak of 138,365,000 people (the working-age population has grown by 14.5 million since January 2008).

Obama hasn't sat idly by. In 2011, he made primetime speeches in support of his American Jobs Act, which, among other things, would invest in infrastructure, cut payroll taxes, and offer businesses a tax credit for hiring the long-term unemployed. In each budget, he has proposed billions of dollars in new infrastructure spending. In 2014, he has repeatedly attacked Republicans for refusing to extend federal unemployment insurance. Yet public support for Obama-era economic policies has slowly fallen throughout his presidency. In May, a Gallup poll found that Americans trust Republicans over Democrats to handle the economy, 48-43.

Herein lies the problem for Democrats: They have an economic agenda that would help return the economy to full employment—when the number of people seeking jobs roughly matches the number of employers seeking workers. But those ideas have lost their political support, because of their supposed lack of success in the Obama era. Meanwhile, left-leaning economists are proposing new ideas to supplement Obama’s economic policies, but they have little political support.

In a paper for the Center for Budget and Policy Priorities’ Full Employment project, created by Jared Bernstein, the former chief economist for Vice President Joe Biden, Larry Summers argued that the United States is experiencing “secular stagnation.” Under secular stagnation, the economy can only grow at an adequate pace if it is artificially boosted by the creation of unsustainable financial bubbles. Without them, economic growth is meager and the economy fails to reach full employment. The solution to secular stagnation is significant rounds of fiscal stimulus to fill the still-large hole in consumer demand for goods and services, known as aggregate demand. But after the first stimulus failed to produce the promised results—mainly because nearly every economist severely underestimated the magnitude of the financial crisis—stimulus has become a dirty word among Washington Democrats. Republicans would answer any calls for additional stimulus with fear-mongering about the deficit. Given the public’s continued concern about the debt, the politics play in the GOP’s favor.

A separate paper, from left-leaning economist Dean Baker, argues that the trade deficit is a significant impediment to full employment. U.S. imports exceeded exports by $500 billion in 2013—that is, $500 billion of American demand for goods and services supported jobs overseas. In response, Baker proposes lowering the value of the dollar and cracking down on currency manipulators like China who artificially lower the value of their currency so that their goods and services are cheaper, boosting exports. Yet, trade policy is not an exciting or accessible issue to most voters. A candidate could include it as part of their economic platform, but it cannot form the backbone of it.

Bernstein and Larry Mishel, the president of the Economic Policy Institute, have both proposed a monetary policy regime that prioritizes low unemployment along with low inflation. Given the Federal Reserve’s independence from the federal government, though, it’s hard to imagine how better monetary policy could become a focal point of a campaign, as it hardly energizes voters. “You are basically getting at the fundamental problem for Democrats in terms of their economic agenda, in terms of the relationship between what they can run on and what they can actually do,” Teixeira said. “The public is not Keynesians or anything close to it. They don’t understand the relationship between spending, debt and growth. And, therefore, it’s the hardest sell.” Republicans, as the minority party, can simply promise a change from the Democratic agenda, regardless of voters’ understanding of their actual economic proposals.

The Democratic presidential nominee—presumably Hillary Clinton—will have to fashion an economic agenda that overcomes this problem. Bernstein believes that a collection of the above policies, along with popular Obama-era ones like increased infrastructure spending, could appeal to voters.

“I see absolutely no reason why a candidate couldn’t or shouldn’t run on a full employment agenda,” Bernstein said. “Maybe those aren’t the right words. I’m not a pollster. The idea that the absence of a robust job market that helps channel the benefits of growth fairly to the middle class strikes me as important. I don’t see why that couldn’t be the core of an effective campaign.” In other words, Democrats will have to convince voters that much of the Obama agenda is still the right prescription for the economy, despite the weak results over the past five-plus years. That’s not easy.

In contrast, Republicans will have a policy agenda that seems substantial and is untested. Whoever the GOP nominee is for 2016, their economic platform will almost certainly contain spending and tax cuts along with a deregulatory plan—the same policies they have supported throughout the Obama presidency. As the minority party, the GOP does not need to change that platform, and it might just appeal to voters if Democrats can't find a better way to sell their economic ideas.